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Bankruptcy trial looms for Northwest and unions
by Mark Zdechlik, Minnesota Public Radio
January 15, 2006

Northwest Airlines' groundworkers will have a chance to vote on a contract proposal from the airline, even as a Tuesday bankruptcy trial for the airline looms. (MPR file photo)

Northwest Airlines and two of its biggest unions have one day left to reach contract agreements. Tuesday, a bankruptcy judge takes up Northwest's request to reject the contracts of its unions, which have refused to accept its cost-cutting proposals.

Over the weekend, Northwest reached a proposed settlement with its largest union, the International Association of Machinists, which represents 14,000 ground workers.
But with the court date now nearly at hand, there are still no agreements between Northwest and its flight attendants and its powerful pilots union.

New York, N.Y. — Northwest is seeking $1.4 billion in annual labor cost reductions. Key to the battle over cost cuts with each of Northwest's three major unions has been the airline's plan to outsource work, and create two new lower-cost companies that would handle work being done by thousands of current Northwest union employees.

Northwest says it needs the restructuring to better position it to compete with low-cost carriers.

The groundworkers union vehemently opposed Northwest's proposal to shift 5,000 of their jobs outside of the Minneapolis and Detroit hubs,to a new company that would handle ground operations, from baggage to customer service.

The union will not discuss details of the proposed settlement its members will soon vote on. But spokesman Joe Tiberi says the groundworkers were able to save what he characterizes as a "large number of jobs."

"We understand it's in everyone's best interest to get this behind us so we can move to the next step, whatever our members decide that is," Tiberi.

Northwest and the International Association of Machinists will ask the bankruptcy judge to postpone their portion of the trial on Northwest's motion to reject its union contracts, until results of the rank-and-file vote are in.

Northwest's pilots are upset with the airline's plan to create a new lower-cost company that would take over their flying in numerous small and medium-sized markets. The pilots say the new company could cost them 1,500 of their 5,000 jobs.

Pilots union leader Mark McClain accuses Northwest of trying to take undue advantage of the bankruptcy process. McClain and other union leaders say Northwest's proposals go well beyond what Northwest needs to be competitive with the rest of the industry. Instead, they say, Northwest is seeking to gain a significant advantage over other airlines by dramatically slashing costs.

McClain cites previously agreed-to pilot wage cuts of 40 percent as evidence his union has demonstrated a willingness to reduce Northwest's costs. He says all along, the pilots have been open to further reductions -- within reason.

But he says the negotiations thus far have been one-sided, with Northwest, in essence, demanding the union accept its proposals.

"It takes two parties to negotiate, and we've stated repeatedly that we feel that management's demands are excessive and an overreach, relative to our competitors in the industry," says McClain. "We'll do what's achievable and what's comparable to our competitors. But we're not going to allow this to be an opportunity for Northwest management to undo decades of collective bargaining, because they feel they have an advantage at this point in time."

Northwest declined to comment for this story, but has said it needs the new airline not only to reduce pilot costs, but also so it can independently finance the purchase of numerous smaller planes which, it says, could more efficiently serve its small and medium sized markets.

Northwest says the new company it envisions would offer jobs to hundreds of laid-off pilots.

Officials with the flight attendants union make an argument similar to the pilots. They say Northwest is trying to use its bankruptcy status to gain a tremendous advantage relative to the rest of the airline industry, at the cost of its employees.

Of primary concern to the flight attendants is Northwest's plan to take away their international flying, and outsource thousands of their jobs.

Both unions are threatening to walk out on strike if the bankruptcy judge imposes what they call Northwest's
"draconian" employment terms on them.

The trial in New York's Southern District Bankruptcy court begins Tuesday morning. The judge has blocked off time to hear from the unions and the airline for the balance of the week, and on also the following Monday.

Although the flight attendants and pilots insist Northwest's proposals are unfair, they fear the bankruptcy judge will favor the airline.

"The judge's primary charge is to facilitate a plan for reorganization that allows the airlines to be competitive, and they're primary focus has not been labor agreements in the past," says the pilots union leader, Mark McClain.

Lynn LoPucki, a bankruptcy expert at UCLA's law school, says the unions' concerns are justified, considering the reputation of the jurisdiction Northwest choose to file its case.

"Bankruptcy courts compete for the cases of large companies. Northwest Airlines and Delta Airlines both went to New York because New York is the most favorable place for management on an issue like this," says LoPucki.

The unions contend that Northwest has failed to live up to its obligation to negotiate in good faith. But LoPucki says the labor groups will have a tough time winning on that point.

"I doubt they're going to get anywhere with that argument because Northwest is well-represented, and ... whether they are negotiating in good faith or not, they will certainly make an appearance to be negotiating in good faith," says LoPucki.

Northwest claims the workers would have no legal right to walk out if the court imposes working conditions that pilots and flight attendants deem unacceptable.

But there's precedent for airline workers striking when a bankruptcy court imposes contracts. It happened at Continental Airlines 15 years ago.

However the Congressional Research Service says President Bush would have the authority to intervene and, should there be a walkout, the president could order the workers back on the job.